UPDATE: AMP Says AXA APH Bid Must Be Economically Responsible

AMP Ltd. (AMP.AU) Chief Executive Craig Dunn said Tuesday the Australian wealth manager's A$12 billion proposal to buy AXA Asia Pacific Holdings Ltd. (AXA.AU) has to make sense economically, and warned AMP has other growth options if the takeover plan falls through.

The comments dulled hopes AMP might soon sweeten its joint proposal with France's AXA SA (AXA), after the target's independent directors last week rejected the offer as inadequate.

Speaking at a business lunch in Melbourne, Dunn said AMP is a financially disciplined company "and will remain so".

"Combining with AXA would accelerate the delivery of key parts of our strategy and make us even more competitive but it only makes sense at a price that's economically responsible," Dunn told the Trans Tasman Business Circle function.

"While the proposed merger with AXA is a transaction we want to do, it's not a transaction we have to do. We have significant opportunities for organic growth in our business in Australia and Asia."

AXA AP's share price fell as much as 3.4% on Tuesday to hit a low of A$5.79 after Dunn's comments suggested a higher bid isn't imminent.

"Given the comments from AMP, it is looking less likely they will get a higher bid, so there has been a little bit of profit taking there," RBS Morgans Private Client Adviser Trent Muller said.

 
   Still Early Days

On Nov. 9, AMP and AXA SA said they were teaming up in a cash and shares bid for AXA APH, which valued the group at A$5.34 a share based on the previous trading day's closing share prices. Shares in AMP have risen since the offer was made, making the proposal more valuable at around A$5.72 a share.

"The proposal has only been gone for seven business days, so in my view it is still early days," Dunn told journalists after the speech.

"We are patient, we will take it step by step, we think the proposal we have made to the AXA minority is a very fair one and it warrants consideration."

Under the complex proposal that is conditional on board approval, each minority AXA APH shareholder would receive 0.6896 AMP shares and around A$1.38 cash for each of their shares. The cash component of the offer varies with movements in the A$/US$ exchange rate but will be at least A$1.2071 per share.

AMP would buy AXA APH, including the 53.9% owned by AXA SA, and keep the Australian and New Zealand businesses. It would then sell the Asian operations to Paris-based AXA SA for around A$7.73 billion.

Dunn said AMP shareholders are strong supporters of the proposal and the AMP share price rise shows the market believes the plan makes strategic and economic sense.

He played down suggestions that AMP might have launched the proposal to protect itself from a potential takeover bid from one of Australia's big banks. "If we had any serious proposal of a takeover, we would take it to our shareholders immediately," he said.

At the close of trading Tuesday, AXA AP shares were down 2.5% at A$5.84.

-By Rebecca Thurlow, Dow Jones Newswires; 61-2-8272-4679; rebecca.thurlow@dowjones.com

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